In 2026, the number of Americans filing for personal bankruptcy is on the rise, reflecting the growing financial pressures faced by many. While bankruptcy often evokes images of struggling businesses, individual filings are far more common. According to the Administrative Office of the U.S. Courts more than half a million personal bankruptcies were filed last year, marking a nearly 50% increase from three years earlier.
The decision to file for bankruptcy is often a last resort, but one that is becoming more accepted as debt burdens grow. Rebecca Lessley, a social worker from Oklahoma City, recently shared her experience of filing for bankruptcy, noting that she was surprised to find how many of her friends had gone through the same process. Her financial troubles began three years ago when she lost her job the same month she purchased her home, leading to a mounting debt that became unmanageable.
Overcoming the stigma of bankruptcy
Experts suggest that the rise in bankruptcy filings indicates that more Americans are reaching a point where the pressure of debt outweighs the stigma associated with bankruptcy. Sasha Indarte a professor of finance at the Wharton School explains that this trend highlights the difficulties consumers are facing in meeting their financial obligations.
Filing for bankruptcy involves proving to a court that you are unable to pay your debts. A court-appointed trustee then determines the next steps, which may include a repayment plan, selling some assets, or erasing certain debts. One of the most significant benefits of bankruptcy is that it provides a formal process for managing debt, which can alleviate the stress of dealing with collection agencies.
The impact on credit scores
Many people worry that filing for bankruptcy will negatively affect their credit history. While it does appear on your record, Mary Eschelbach Hansen a bankruptcy economist at American University points out that if you are considering bankruptcy, your credit score is likely already in poor shape. Surprisingly, research by Samuel Antill an assistant professor at Harvard Business School shows that most people’s credit scores improve within a year of filing for bankruptcy.
“People don’t understand how good of a deal bankruptcy is,” Antill said, emphasizing the potential long-term benefits of the process.
The post-pandemic shift in bankruptcy rates
Despite the recent increase in bankruptcy filings, the rates are still below pre-pandemic levels. Bob Lawless a professor of law at the University of Illinois and co-principal investigator for the Consumer Bankruptcy Project notes that bankruptcies plummeted during the pandemic years due to government interventions such as stimulus checks and expanded unemployment benefits. By 2026, personal bankruptcy rates had fallen about 51% compared to 2019.
However, with the expanded social safety net now gone, bankruptcy filings are climbing back up. Lawless explains that the current rates are returning to historical norms, reflecting the ongoing financial challenges faced by many Americans.
A glimpse at financial distress
Researchers caution against using bankruptcy rates as a sole indicator of the country’s economic well-being. Matt Schulz chief consumer finance analyst at Lending Tree notes that bankruptcy represents an extreme situation and does not provide a complete picture of the economy. “This is basically the end of a long difficult journey,” Schulz said, highlighting that the decision to file for bankruptcy often comes after prolonged financial struggles.
Despite the challenges, many individuals find relief in the process. Rebecca Lessley, who is working out the details of her bankruptcy, which will likely include a five-year repayment plan, feels a sense of relief. “Maybe this is what I needed to get me back into a better position and to have a little bit more financial success,” she said, reflecting the hope that bankruptcy can offer a path to financial recovery.
